6:30 P.M. and three more cars just pulled up to my place… on a Monday…
Have I just bought a McDonald’s franchise? Not quite. This is the start of what we call “tax season” in the used car business.
A time when tens of millions of Americans who live paycheck to paycheck get a nice four figure lump sum from Uncle Sam and his favorite sub-prime debt dealers.
I just got a job that involves a fair amount of driving and I am looking to spend about 11-13k on a car that is fun to drive but at the same time practical and reliable.
Haven’t you heard the exciting news? There’s a new Corvette out this year! Cadillac is building convertibles again! The VW Vanagon has a water-cooled engine! Oldsmobile is offering some kind of voice warning doohickey and the FIRENZA HAS NEW TRIM OPTIONS!1!!11! All with interest rates hovering just under 13%! It’s 1984, and I just can’t wait to check out the goods at the auto show.
Months after TTAC started to relentlessly bleat about the glut of money flowing into the auto loan sector, the mainstream media is finally taking notice. Automotive News is finally expressing some worry over the factors that we’ve been discussing for some time: car loan terms are getting longer (to help keep payments low), subprime lending is increasing and an expected rise in interest rates could put an end to the new car market’s exuberant performance.
While the engine behind the exceptional growth in new car sales is a hotly debated topic, leasing is proving to be an undeniable catalyst behind this year’s impressive new car sales numbers. Through June of this year, leasing accounted for 25.7 percent of new car sales, versus 22.2 percent in 2012. A decade ago, that number stood at just 17.5 percent.
The Detroit Free Press paints a pretty clear picture of the automotive lending landscape: auto loan terms are rising, with 1 in 5 loans now lasting longer than 6 years. At the same time, the average credit score for those taking out loans is dropping. Ominous signs for a car market that’s running on the hype of a perpetually increasing SAAR, right? Well, not according to some.
Bad news on the subprime front, as credit rating agency Experian reports a rise in delinquencies and repossessions for auto loans in Q1 2013.
Melinda Zabritski offered a rather dubious explanation for the nearly 17 percent rise in repos (as well as the 1.3 percent uptick in 30 day delinquencies and 12.4 percent rise in 60-day delinquencies) (Read More…)
8 years to pay off a car? A report by the Wall Street Journal claims that in Q4 of 2012, the average car loan stretched out to 65 months, or just over 5 years. Loan terms were being stretched out over increasingly longer terms too, with credit firm Experian reporting that nearly 1 in 5 car loans had terms between 73 and 84 months long, with some stretching for as long as 97 months.
When Lee Iacocca was a Ford regional manager, he helped pioneer auto loans. Consumers could buy a 1956 Ford for 20% down and $56 a month. The loans were paid off in just 36 months. In the final quarter of 2012, the average term of a new car note stretched out to 65 months, says Experian. 17% of all new car loans in the past quarter were between 73 and 84 months. A few were as long as 97 months. This trend bears huge risks for consumers and industry, says the Wall Street Journal. (Read More…)
Anyone looking for an anecdote illustrating the QE-fueled madness that is subprime auto lending, take a look at this Reuters report on what constitutes a down payment in the subprime world.
And still, though Nelson’s credit history was an unhappy one, local car dealer Maloy Chrysler Dodge Jeep had no problem arranging a $10,294 loan from Wall Street-backed subprime lender Exeter Finance Corp so Nelson and his wife could buy a charcoal gray 2007 Suzuki Grand Vitara.
All the Nelsons had to do was cover the $1,000 down payment. For most of that amount, Maloy accepted Jeffrey’s 12-gauge Mossberg & Sons shotgun, valued at about $700 online.
Long-term auto loans, leasing and sub-prime financing all saw increases year-over-year from 2011 to 2012, according to a report by Experian, a consumer credit rating agency. While typically a dry and detail-oriented subject, the area of auto financing gives us some insight into the nature of the new car market and even the economy itself.
When you have 120 dealers looking at the same exact car on a Monday morning, you have three options if you plan on buying a car.
After I saw a 2003 Infiniti FX35 with 220,558 miles sell for $9100 plus the auction fee, I left for good.
I told you that I would report back to the TTAC faithful when something new came up.
Well, for quite a few weeks there has been the usual distribution of dominance when it comes to high mileage cars that are curbed by their owners. 70% to 80% of the vehicles in the Top 25 of trade-ins mileage wise (out of 6000+ a week) were either Ford and Chevy trucks, Honda cars, or Toyota anything.
This week the streak is broken. Thanks to two Saturns which managed to cross the 400k mark.
“Aaahh Steve? My rig caught on fire.”
At first I thought about oil rigs in the Gulf of Mexico engulfed in an endless torch of black smoke and molten metal.
Then I realized that the repo driver was talking about his own truck. In all my years of dealing with repo companies, I had never known an auto recovery company, big or small, that was neglectful enough to turn their money maker into an ashen shell.
Before noon I would be awakened by another surprise.
Whether you drive a $30,000 or a $1,500 a car, one variable in life stays constant.
You want to minimize your costs.